Cryptocurrencies that rely on proof of work technology, notably Bitcoin and Ethereum, have been criticized for the amount of electricity consumed by mining.[1][2] This has led to greater interest in cryptocurrencies that use proof of stake.[3][4]

Bitcoin energy consumption

Electricity consumption of the Bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology)
Electricity consumption of the Bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology)

As of 2022, the Cambridge Centre for Alternative Finance (CCAF) estimates that Bitcoin consumes 131 TWh annually, representing 0.29% of the world's energy production and 0.59% of the world's electricity production, ranking Bitcoin mining between Ukraine and Egypt in terms of electricity consumption.[5][6]

George Kamiya, writing for the International Energy Agency, says that "predictions about Bitcoin consuming the entire world's electricity" are sensational, but that the area "requires careful monitoring and rigorous analysis".[7] One study done by Michael Novogratz's Galaxy Digital, a cryptocurrency investment firm, claimed that Bitcoin mining used less energy than the traditional banking system.[8]

Sources of energy

Until 2021, according to the CCAF much of Bitcoin mining was done in China.[9][10] Chinese miners used to rely on cheap coal power in Xinjiang[11][12] in late autumn, winter and spring, and then migrate to regions with overcapacities in low-cost hydropower, like Sichuan, between May and October. In June 2021 China banned Bitcoin mining[13] and Chinese miners moved to other countries.[14] By December 2021, the global hashrate had mostly recovered to a level before China's crackdown, with increased shares of the total mining power coming from the U.S. (35.4%), Kazakhstan (18.1%), and Russia (11%) instead.[15]

As of September 2021, according to the New York Times, Bitcoin's use of renewables ranged from 40% to 75%.[1] According to the Bitcoin Mining Council and based on a survey of 32% of the global network, 56% of bitcoin mining came from renewable resources in Q2 2021.[16] However, experts and government authorities have suggested that the use of renewable energy by the cryptocurrency mining sector may limit the availability of such clean energy for ordinary uses by the general population.[1][17][18]

Proof of stake and other types of networks

While the largest proof of work (PoW) blockchains such as Bitcoin and Ethereum consume energy on the scale of medium-sized countries, demand from proof of stake (PoS) blockchains is on a scale equivalent to a housing estate. Various sources have cited 2021 figures compiled by TRG Datacentres in Texas of energy use in kilowatt hours per transaction: IOTA (0.00011); XRP (0.0079); Chia (0.023); Dogecoin (0.12); Cardano (0.5479); Litecoin (18.522); Bitcoin Cash (18.957); Ethereum (62.56); and Bitcoin (707). This has led to the identification of "eco-friendly cryptocurrencies”: Chia, IOTA, Cardano, Nano, Solarcoin and Bitgreen.[19][20]

Chia is based on a proof of space algorithm, which uses a lot less power because it relies on storage devices, not computer processing power.[21] However, the huge number of hard discs needed produces considerable amounts of electronic waste.[22][23]

Academics and researchers have used various methods for estimating the energy use and energy efficiency of blockchains. The Germany-based Crypto Carbon Ratings Institute (CCRI) studied the six largest PoS networks in May 2021. Its conclusions in terms of annual consumption (kWh/yr) were: Polkadot (70,237), Tezos (113,249), Avalanche (489,311), Algorand (512,671), Cardano (598,755) and Solana (1,967,930). This equates to Polkadot consuming 7 times the electricity of an average U.S. home, Cardano 57 homes and Solana 200 times as much. The research concluded that PoS networks consumed 0.001% the electricity of the Bitcoin network.[24]

The table below summarises the TRG and CCRI results alongside research from the University College London (UCL).[25] These sources give a measure of energy efficiency in terms of energy use per transaction.

Estimates of energy use per cryptocurrency transaction from 3 sources (Wh/tx)
Algorand (PoS) 0.17–5.34 2.70
Cardano (PoS) 12.39–378.54 51.59 547.9
Polkadot (PoS) 3.78–115.56 17.42
Tezos (PoS) 0.36–10.96 41.45
Bitcoin (PoW) 360,393–3,691,407 1,722,240 707,000
VisaNet (as a comparator) 3.58 1.5

Negative impact of mining

Bitcoin carbon emissions

Concerns about Bitcoin's environmental impact relate the network's energy consumption to carbon emissions.[26][27] The difficulty of translating the energy consumption into carbon emissions lies in the decentralized nature of Bitcoin impeding the ability of researchers to identify miners geographically and so examine the electricity mix used. The results of studies into the carbon footprint vary.[28][29][30][31] A 2018 study published in Nature Climate Change claimed that Bitcoin "could alone produce enough CO2 emissions to push warming above 2C within less than three decades."[30] However, three later studies in Nature Climate Change dismissed this analysis on account of its poor methodology and false assumptions with one study concluding: "[T]he scenarios used by Mora et al are fundamentally flawed and should not be taken seriously by the public, researchers, or policymakers."[32][33][34] According to studies published in Joule and American Chemical Society in 2019, Bitcoin's annual energy consumption results in annual carbon emission ranging from 17[35] to 22.9 MtCO2 which is comparable to the level of emissions of countries as Jordan and Sri Lanka or Kansas City.[31] However, other academic studies report a much broader range of carbon footprint estimates. For instance, according to a study published in Finance Research Letters in 2021, differences in underlying assumptions and variation in the coverage of time periods and forecast horizons have led to Bitcoin carbon footprint estimates spanning from 1.2-5.2 Mt CO2 to 130.50 Mt CO2 per year.[36]

Electronic waste

The total active mining equipment in the Bitcoin network and the related electronic waste generation, from July 2014 to July 2021.[37]
The total active mining equipment in the Bitcoin network and the related electronic waste generation, from July 2014 to July 2021.[37]

Researchers estimate that electronic waste generated by Bitcoin mining devices amounts to 30.7 metric kilotonnes annually as of May 2021. Due to the consistent increase of the Bitcoin network's hashrate, mining devices are estimated to have an average lifespan of 1.29 years until they become unprofitable and need to be replaced. Mining devices based on ASIC technology, the standard hardware for mining, are specialized and cannot be repurposed for another use, and hence become electronic waste once they become unprofitable.[37][38]

Efforts to reduce impact of mining

Some major cryptocurrencies are implementing technical measures to reduce the negative environmental impact.

Bitcoin developers are working on the Lightning Network that would reduce energy demand of the network by moving most transactions off the blockchain.[39][better source needed]

Ethereum is planning a transition from proof of work to a proof of stake algorithm. This could reduce the network's energy demand by 99%.[39][40]

Possible remedies

The development of intermittent renewable energy sources, such as wind power and solar power, is challenging because they cause instability in the electrical grid. Several papers concluded that these renewable power stations could use the surplus energy to mine Bitcoin and thereby reduce curtailment, hedge electricity price risk, stabilize the grid, increase the profitability of renewable energy infrastructure, and therefore accelerate transition to sustainable energy and decrease Bitcoin's carbon footprint.[41][42][43][44][45][46][47][48]

Some hydroelectric plants are using the excess power to mine Bitcoin.[49][50] According to the owners of Mechanicville Hydroelectric Plant, the mining saved the plant from dismantlement.[49]

Reversible computing chips and hash recycling could possibly provide some advantage to bitcoin mining in forms of reduced energy usage and e-waste, but the reversible computing is still at its early stages. The paper [51] suggests starting research and development on reversible bitcoin mining chips and also hash recycling for providing entropy to pseudorandom number generation.

Climate-related criticism of Bitcoin is primarily based on the network’s absolute carbon emissions, without considering its market value. However, when taking a relative emission perspective that connects Bitcoin’s carbon emissions to its market value, one study suggests that Bitcoin investments can be less carbon-intensive than standard equity investments. The addition of Bitcoin to a diversified equity portfolio can thus reduce the portfolio’s aggregate carbon footprint.[36]

A 2022 study concluded that cryptocurrencies and other blockchain applications can support the transition to a circular economy and the underlying three principles of reducing, reusing, and recycling. Cryptocurrencies and token rewards can be used to incentivize the sustainable behaviour of individuals. For example, token reward models can incentivize individuals to recycle. There are also several plastic cleanup incentive mechanisms that rely on token rewards.[52]


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